After several tumultuous years of failed bids and aborted takeovers, notorious rap music label Death Row was plucked off the auction block once more, this time by a Canadian entertainment company that offered $18 million.
Toronto-based WIDEawake Entertainment Group submitted the winning bid to U.S. Bankruptcy Court in Los Angeles against competitors Warner Music Group and Conquest Media Group. It's a song compared with the $25 million that heavyweights Warner and Koch Records had offered in prior cycles of the Death Row saga.
Beverly Hills-based Conquest, which had filed an initial bid of $10 million, was excluded as a bidder early in Thursday's auction because it had failed to submit a complete deposit to the trustees by the Dec. 8 deadline.
"This isn't a Christmas shopping expedition," Judge Vincent P. Zurzolo chided the company. "This is a significant transaction."
Some creditors emerged from the auction disgruntled, saying that the low price meant they would receive little or none of the money they were owed by Death Row, which filed for Chapter 11 bankruptcy protection in 2006. The label was originally owned by music mogul Marion "Suge" Knight.
"This was a charade," said businessman Mark Friedman, who said he was owed $1 million for investing in a Death Row project. "The trustees didn't seem to pursue any real bidders and completely mismanaged Suge Knight's estate. It's like whatever's left on the body, they're taking their last pickings."
WIDEawake, which was formed in 2006, will take on Death Row's enviable catalog of gangster rap, including albums from rap stars such as Dr. Dre, Tupac Shakur and Snoop Dogg. The young company, which is treating 2009 as a major year for acquisitions, is also eyeing several other catalogs, Chief Executive Lara Lavi said.
"We've been very carefully building our bridges, and this is a strategic move for us as part of a 10-year plan," Lavi said.
She said she was surprised by the lack of resistance from competing bidders. "We kind of expected Warner to be a little more pricey, but the economic climate right now for everyone is very challenging."
In the heyday of Death Row, the label sold tens of millions of albums and developed a near-mythical, if sordid, reputation.
After years spent steeped in controversy, and after an exodus of talent, the company imploded amid allegations of mismanagement and infighting.
It was unable to pay a $107-million default settlement awarded in 2005 to former Knight associate Lydia Harris, who contended she helped found Death Row with Knight. The suit alleged that Knight bilked Harris and her former husband, Michael, who is serving a 28-year sentence at San Quentin State Prison for drug dealing and attempted murder, out of millions.
"I'm glad it's over because I knew the entire time it was just a game," Harris, president of independent label Lady Boss Entertainment, said after the auction. "The trustees strategized to shut me out. What else can I do?"
In July 2006, a California judge ordered a bankruptcy trustee to take over the label. Since then, Death Row has skidded from bid to retracted bid. Both Warner and Koch backed out of bids in 2007 and were replaced in June 2008 by investment group Global Music Group Inc., which offered $24 million.
But within months, Death Row trustees were asking permission to seek new buyers after partners at Global missed a deadline because they were fighting internally for control of the Death Row label.
WIDEawake's Lavi, however, said her bid would be completed. "Whenever it's due, that bill will get paid," she said. "This was not an emotional decision. This was a business decision. You can't go into a deal like this without having a plan."